AltFi Australasia Summit 2017

27th February 2017

WELCOME TO OUR 2017 AUSTRALASIA SUMMIT REVIEW

Firstly, a huge thank you to all those who attended and supported the AltFi Australasia Summit 2017!

The AltFi Australasia Summit 2017 gave delegates a look at how profitability could be achieved in a consolidating industry. Nearly 300 delegates heard how technology was disrupting financial services and informed opinions on where the industry goes from here.

What's Next for Alternative Lending for Australian SME's

Rob Young (OnDeck)

Rob gave the opening keynote explaining fintech’s success and how different countries compared.

China is getting tighter regulation. The US has the largest market by far, but it is contracting.

He thought most highly of the UK, which has grown significantly, owing to good regulation. The EU by contrast was lagging behind in terms of origination volumes.

“Why is the growth in online lending happening? There are reasons on the yield side, but it’s mostly on the demand side. That is, customers really enjoy looking at alternative sources besides the bank.”

Marketplace Lending - a maturing industry and asset class

Ron Suber (Prosper)

Ron argued that the sharing economy is transforming into an access economy — “think about Uber and Airbnb and how they changed things. We’re creating this access and access economy to things we could never get to on our own.”

He compared the transformation occurring in online lending to what occurred in online trading decades before. “In 1985 there was no industry, then global growth, then volatility then M&A, then establishment. What we’re doing is the same thing. It follows the same path.”

He said that the days of getting easy money from venture capital aren’t over but they’re changing in fundamental ways.

Trends in Australian credit quality

Simon Bligh (Dun & Bradstreet)

Simon’s presentation focussed on credit trends and for him, Australia was not in a good place.

“What are we seeing in collections frankly its not good: the volume of customers is increasing quite significantly. But the line that is more concerning to me here is the average value, you’ll see that that is on a distinct upward trend.”

The rate of change is at an historical high and we’re seeing sharp deterioration in the ability to pay from the bottom three deciles of the population. “Its an early signal of distress.”

The change on the SME side was not promising either as days past due was increasing.

The default trends were also geographically concentrated in the south-eastern states and territories of Australia (VIC, NSW, SA, ACT).

Is Blockchain overhyped?

The panel, moderated by Tal Morgenstern, discussed the growth of Blockchain in Australia

Loretta Joseph made the case that advocates needed to be more proactive in engaging regulators as there was only one Australian regulator that recognised the Blockchain.

For John, there was an important element of trust. If there is no trust in the system then it wouldn’t develop or grow.

Chami Akmeemana took a stronger line, arguing that “blockchain will work for the consumer, inherently” — as it was consumer driven. “The risk is not adapting to blockchain: the system has been around for a while and we’ve had no breeches of privacy and security.”

Lessons in disruption: Innovation in investing

Graham Tuckwell (ETF Securities), David Stevenson (AltFi)

The Chairman of ETF Securities gave his views on fintech’s potential and how it can learn from the experience of ETFs.

“I think that fintech is where ETFs were about 10 years ago.”

Five years ago, hotels were only worried about competition from each other then along came AirBnB. Hotels were wrong to think they were invincible, so are banks.

“You need to get yourself defined as an asset class. its partly through the media, through the regulator and through the exchanges.”

“In the early years of ETFs it was just the industry talking to itself. The big push we drove was to convince all the influencers instead of marketing to customers market to the influencers. It’s too expensive and hard going to customers go to the intermediaries.”

How can banks emulate "fail fast and pivot" approach of a start-up?

This panel debated what banks can learn from startups and what challenges they face in a fast moving industry, facilitated by Michael Bennet.

Rebecca said big banks are usually slow moving, but NAB created a fintech very quickly. She said that the industry was moving quicker than ever, “I’ve been in the industry two decades and I’ve seen most innovation in the past two years.”

Kareem said that big banks were too big and Tryo was trying not to get sucked into the bureaucracy and silos of big banking. “We’re trying not to fall in the hole. We don’t want a situation where things get political and territorial.”

Macgregor said that all Australian banks are thinking about fintech and how they fit in. “Its critical that we develop our responsiveness to trends in the marketplace. On both sides of the equation there is a lot of learning to be done in order to get better.”

What is Responsible Small Business Lending?

Facilitated by Kieren Parker, this panel examined lending ethics and wondered out loud who fintech lenders were responsible to.

For Leo, education was more than key “we have to make it clear to borrowers how things work.” And made clear there was an ethical case in rejecting loan requests.

Aris emphasised the role of transparency, so it was clear to borrowers what they were getting into. This involved telling borrowers that if they’re riskier the loan is going to cost more.

Boyd claimed that the structure of international finance failed SMEs. “SMEs create 50% of jobs. If you’re a young person who doesn’t have real estate collateral you can’t get a loan.”

Jens said that in direct lending companies are responsible not to overcharge or provide too much capital that borrowers can’t serve at the end. “You have to explain to them that we can’t provide too much as we’re providing 12-18 month loans, not 10 years.”

This panel debated what banks can learn from startups and what challenges they face in a fast moving industry, facilitated by Michael Bennet.

This panel centred around profitability and how new platforms are struggling to achieve this because of customer acquisition costs.

David warned that a lot of platforms were struggling and going under before ever achieving profitability. It then becomes hard to attract investors if you don’t have profits.

Jon, who sits on seven fintech boards, warned that there was a risk with any tech startup that if incumbents wake up to the threat posed new comers.

James emphasised that rely on repeat customers what not so much the issue, what mattered was covering customer acquisition costs.

Indraveer issued a stark warning that many platforms will never become profitable, major platforms are not profitable yet, that doesn’t mean you’ll never be profitable - but the dreaming days are over.

New Generation of Disruptors

This young panel interviewed budding entrepreneurs, looking at where they saw the industry going.

David emphasised the importance of versatility and offering multiple products. “We see a huge amount of crossover between customers, if one customer gets declined they might be able to get a personal loan from our other product”.

Ritchie emphasised that having a unique identity was important and that tech could be used to find a niche.

Stuart argued that it was not all set and done and the market hadn’t consolidated yet, although moves were being made in that direction.

Stephen said that targeting millennial was very experience-driven and that what mattered above all was Uber-like simplicity.

Wiemen said that using technology to assess credit risk was important, not only for assessing actual risk but also for building investor confidence.

Is our business banking system really dysfunctional and how do we fix it?

This panel debated what banks can learn from startups and what challenges they face in a fast moving industry, facilitated by Michael Bennet.

This panel of industry veterans examined just how broken the Australian banking system was compared to other countries, and made productive suggestions as to how it could be bettered.

For former Liberal Party leader John Hewson, there’s a reasonable possibility that the big banks will be broken up. “It’s very difficult to do but its a political solution. Free marketers would not necessarily oppose that as they have to be seen to do something.”

Dermot Crean said that it wasn’t just the banks behaving badly, but that there were also real problems with the Basel Accords. He wondered whether an act of parliament was necessary to fix the banks or is it enough to codify what we’ve already got?

Kevin Nixon said that big banks won’t do data-based SME loans like fintechs simply because such loans are riskier and making riskier loans jeopardised their capital - risk ratios.

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About AltFi

Altfi provides market-leading news, insights and data on the rapidly growing alternative finance and fintech world. Our core focus is on alternative lenders, including both peer-to-peer/marketplace lenders and direct lenders as well as investment in alternative credit, equity crowdfunding, challenger banks and robo-advice. In addition, AltFi runs major industry conferences and seminars globally, and our sister company AltFi Data is widely regarded as the premier source of institution-grade analytics for alternative finance.